by Russell Noga | Updated January 10th, 2024
Medigap plans are supplemental insurance policies for beneficiaries enrolled in Original Medicare Parts A & B. These policies require monthly premiums to remain enrolled.
If you don’t pay your monthly premiums, the insurer may cancel your plan, leaving you uninsured.
Medigap plans are available from private healthcare companies, and each provider charges different premium rates for their policies.
When assessing you for your premium, the provider uses your gender, age, smoking status, and location in the United States to set your rate.
Your premiums increase annually, depending on factors influencing your risk profile and the Medigap provider’s internal pricing policies.
This post gives you information on understanding the rate increase history for Medigap plans and how providers increase your Premiums.
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Understanding Medigap Benefits & Coverage
The CMS is a federal agency responsible for regulating the Medicare and Medicaid industries. CMS ensures all Medigap providers offer the same standardized benefits in plans relating to Medicare Part A & B expenses.
All Medigap plans offer the following benefits.
- Part A coinsurance and hospital costs for up to 365 days after using Medicare benefits.
- Part A hospice care coinsurance or copayment.
- Part B coinsurance or copayment.
- Blood transfusion costs for the first three pints of blood.
Plans F*, G, and N offer additional Medicare Parts A & B benefits.
- Part A deductible.
- Part B excess charges (Plan N doesn’t cover these charges).
- Skilled nursing facility care coinsurance.
- 80% of emergency healthcare costs when traveling outside the US for 60 days. ($250 deductible and $50,000 maximum apply).
- Unlimited coverage for all out-of-pocket costs.
*Plan F is the only Medigap policy covering the Part B deductible. However, the CMS is phasing it out, and unavailable to beneficiaries qualifying for Medicare Parts A & B after January 1, 2020.
You might still qualify for Plan F if you’re eligible for Medicare before this date and not enrolled in a Medigap plan.
However, Medigap providers might require you to undergo medical underwriting before offering you Plan F.
If you have a guaranteed issue right, you can avoid medical underwiring when signing up for Plan F.
Call our team to get more information on your situation and whether you qualify for guaranteed issue rights when enrolling in Plan F.
What Factors Affect Increases in Medigap Premiums?
As mentioned, Medigap providers use your age, gender, smoking status, and location to determine your risk profile and what they charge in monthly premiums.
Women will pay lower premiums than men because men present a higher insurance risk. For instance, rates of heart attack and diabetes are more prevalent in men than in women.
Smokers are more expensive to insure than nonsmokers because they tend to be at a higher risk for developing chronic health conditions as they age. The older you are, the more at-risk you are of developing health disorders that increase your risk profile with insurers.
Age is a significant factor in increases in Medigap premiums. Health insurers use one of three models when assessing your age for premiums.
- Attained age-rated – The premium is based on your age when applying for a Medigap plan. The rate increases as you get older. These premiums often start lower but get more costly as you age.
- Issue age-rated – The insurers base your premium on your age at the date of application. The younger you are, the lower the premium. This premium remains constant and doesn’t increase as you age.
- Community-rated – Regardless of age, all policyholders receive the same monthly premium.
If the insurer uses an attained age model, your premiums will increase as you age. So, it’s important to ask the insurer or agent about the insurer’s age rating model when applying for a Medigap plan.
Other factors causing increases in Medigap premiums include inflation and your claims history.
If you make frequent claims on your policy, the insurer will increase your premiums to compensate for the risk of insuring you.
Economic factors like inflation increase the Medigap provider’s costs as do health claims each year.
For instance, age inflation means they must pay their employees more, and they transfer these costs to beneficiaries by increasing monthly premiums.
Additionally, Medicare increases the Medicare Part A & B deductibles from time to time. Since Medigap plans cover these costs, they’ll transfer the increase to the beneficiary through higher premiums.
Annual Trends in Medigap Premium Growth
Depending on the plan state the beneficiary resides in, Medigap premiums typically increase at a rate of 5% to 8% annually. Depending on your plan and the provider you use, you could see annual increases at the start of the year, in your birthday month, or on both occasions.
Occasionally, Medigap premiums would stay flat year-on-year with no changes. However, the increase in annual inflation rates since 2021 means you can expect higher premiums to compensate for the additional costs your Medigap provider incurs for running their scheme.
Some of the trends in premium increases are as follows.
- Increases in Medicare spending per capita at the state level led to increased Medigap premiums.
- Individual and older Medigap policies are more expensive than group and new policies.
- Medigap policies with fewer covered lines are more expensive.
- Medigap policies with the largest number of covered lives have smaller increases in premiums.
- Premiums for issue-age-rated plans are typically lower than attained-age-rated plans.
The data show Medigap premiums experienced moderate increases over the last two decades. In most instances, increases in premiums are lower than the average increase in Medicare spending per capita.
However, there are large variations across plan types and states for Medigap premiums. So, increases depend on Medicare spending per capita and differences in beneficiary risk profiles.
When Do Medigap Premiums Increase?
Medigap premiums see significant increases when the plans lack availability, such as in the case of Plans F & C. These policies were discontinued for new beneficiaries to Medicare after January 1, 2020. Premiums will also see a faster rate of increase when inflation and medical costs increase rapidly, as is the case for 2020 and 2023, where inflation peaked at highs not seen since the 1970s.
For instance, while the average increase for Medigap premiums in the last decade was between 5% to 8%, some plans saw a 12% or greater increase due to rising company costs and loss ratios in 2022. The loss ratio indicates the percentage of health benefits paid compared to what the insurer collects in monthly premiums.
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Frequently Asked Questions
What is the Rate Increase History for Medigap Plans?
Call Our Team for the Best Rates on Medigap Premiums
Reach out to our team at 1-888-891-0229 for a free consultation and professional advice on Medigap policies and rates. We’ll source you the best Medigap plan from providers in your state at the lowest premiums.
If you can’t call us right now, leave your contact details, and we’ll have a fully licensed Medigap agent get back to you. Or you can use the automated tool on our website to get a free quote on any Medigap plan.
Russell Noga is the CEO and Medicare editor of Medisupps.com. His 15 years of experience in the Medicare insurance market includes being a licensed Medicare insurance broker in all 50 states. He is frequently featured as a featured as a keynote Medicare event speaker, has authored hundreds of Medicare content pages, and hosts the very popular Medisupps.com Medicare Youtube channel. His expertise includes Medicare, Medigap insurance, Medicare Advantage plans, and Medicare Part D.